QUESTION 1 Not complete Marked out of 17.00 Flag question Applying and Analyzing

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QUESTION 1 Not complete Marked out of 17.00 Flag question Applying and Analyzing Inventory Costing Methods At the beginning of the current period, Chen carried 1,000 units of its product with a unit cost of $32. A summary of purchases during the current period follows. Units Unit Cost Cost 1,000 1,800 Beginning Inventory Purchase #1 Purchase #2 Purchase #3 $32 $32,000 34 61,200 38 30,400 41 49,200 800 1,200 During the current period, Chen sold 2,800 units (a) Assume that Chen uses the first-in, first-out method. Compute both cost of good sold for the current period and the ending inventory balance. Use the financial statement effects template to record cost of goods sold for the period Ending inventory balance s 0 Cost of goods sold $ 0 Use negative signs with answers, when appropriate Balance Sheet Noncash Contributed Earn Transaction Cash Asset + Assets Liabilities Capital Capit

Explanation / Answer

a)

b)

C)

Average cost per unit = total cost / total unit

= 172,800/4,800

= $36 per unit

Therefore"

Ending inventory balance = 2000 units @ $36 per unit =$72,000

Cost of goods sold =2800 units @ $36 per unit =$100,800

172,800

d)

1) Average cost

In average cost , all goods are valued at same rate calculated on average basis , so it only show just flow of goods

2) LIFO

In this case for valuation the latest cost are used , so the cost of sold goods will be higher and thereby reported income will be less and finally lead to minimize income taxes.

3) FIFO

FIFO method the cost of goods sold will be lower compared toboth methods , so the income will be higher since the method uses old rates for valuation , it gaves lesser amount.

Ending inventory balance - $ 79,600 Cost of goods sold               - $ 93,200

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